Allocative Efficiency Occurs When

question 140

Multiple Choice

Allocative efficiency occurs when

• A) we cannot produce more of any one good without giving up some other good.
• B) opportunity costs are decreasing.
• C) marginal benefit exceeds marginal cost.
• D) we cannot produce more of any good without giving up some other good that we value more highly.

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Definitions:

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds, essentially how much it costs a company to use funds for projects or business activities.

Replacement Projects

Investments made to replace outdated or aged assets to maintain or improve the efficiency of operations.

Expansion Projects

Initiatives undertaken by a company to increase its capacity, sales, or market reach, typically requiring significant investment.

Accounting Beta Model

A method used in finance to estimate the beta of a company's stock based on its accounting ratios, as opposed to market-based measures.